Rebel's Edge - Paypal and the AI Wallet

Key Concepts

• Macroeconomic Trends: Market highs, technology sector strength (Apple, Microsoft), earnings season.
• Futures Market: Copper price surge due to supply disruptions and high demand, including AI influence. Silver price volatility.
• Cryptocurrency: Ethereum's role in Japan's stablecoin development, positioning it as a distinct tool from Bitcoin.
• Short Squeeze Analysis: Identifying stocks with rising short interest, high short ratio, and short intensity.
• Unusual Options Activity (UOA): Combining short squeeze data with UOA for potential trade signals.
• Corporate Earnings & News: Analysis of UPS, PayPal, Skyworks, Rambus, and their market impact.
• Sports Analysis: Shohei Ohtani's exceptional performance, Heisman Trophy contenders (Fernando Mendoza, Ty Simpson).
• College Football Dynamics: Impact of player transfers and coaching on team performance (Indiana University).

Macroeconomic Overview and Market Trends

The discussion begins with a brief overview of the current macroeconomic landscape, noting that the market is breaking out to new all-time highs. While acknowledging the practice of trimming positions and taking some profit, the speakers emphasize that fading the current trend is not advisable. The strength of the technology sector is highlighted, with Apple and Microsoft reaching $4 trillion market caps. The week ahead is also noted for a significant earnings season.

Fantastic Futures: Copper and Silver

Copper: Copper has experienced a significant upward trend since early August, rising from $4.3 to $5.2 per pound. This surge is attributed to supply disruptions and high demand, with the growing influence of Artificial Intelligence (AI) also cited as a contributing factor.

Silver: In contrast, silver has shown volatility. It moved from $15-$16 to $25 in mid-month, but has since retreated back to the $15-$16 range by the end of the month. The market appears to be "trapped" within this range, with occasional spikes above $20.

Cryptocurrency: Ethereum's Growing Role

Ethereum is highlighted for its increasing adoption, particularly with Japan building its own stablecoin on its national currency using Ethereum. This trend suggests that Ethereum is not directly competing with Bitcoin but rather serving as a distinct and valuable tool within the cryptocurrency space, presenting a potential long-term bullish case.

Short Squeeze Analysis: Identifying Potential Candidates

Jeff Garbaz, an expert in short squeeze analysis, identifies two stocks with rising short interests:

Absilera Biologics (ABCL)

• Rising Short Interest: The stock exhibits a significant increase in short interest, with a short ratio now at 11.5 days. This indicates that it would take 11.5 days for short sellers to cover their positions if they accounted for 100% of the trading volume. If short sellers only represent half the volume, it could take a month on average volume to cover.
• Short Intensity: Short intensity has risen to 85%, signifying a high concentration of short bets relative to the stock's float.
• Price Action: The stock has moved from around $2.50 to $5.77.
• Upcoming Catalysts: Absilera Biologics is scheduled to participate in four sell-side conference presentations in November and December, which could provide catalysts for price movement.

Nation Biologics

• Building Short Position: Short interest has been steadily building since March, with approximately 79 million shares now short.
• Short Ratio: The short ratio has increased to 18.12 days, suggesting a longer potential covering period for shorts.
• Short Intensity: Short intensity is at 64%.
• Technical Strength: The stock has a tech rank of 100, indicating strong performance over the last 100 trading days. It has risen from $2 in July to over $5.
• Upcoming Catalyst: An important business update is expected on November 3rd, which could lead to immediate price action, either positive or negative.

Garbaz likens analyzing short interest to observing betting patterns in Las Vegas, providing insight into market sentiment and potential future movements. He notes that as the market trends higher, more opportunities for short squeezes tend to emerge, particularly in sectors like biotech where shorting is common.

Pairing Short Squeeze Data with Unusual Options Activity (UOA)

The discussion highlights the synergy of combining short squeeze data with Unusual Options Activity (UOA). In the case of ABCL, a significant increase in short interest was observed alongside UOA where traders bought January $6 strike calls for $4.05-$50. This suggests smart money is anticipating a move higher, potentially driven by a short squeeze.

Corporate Earnings and News Analysis

United Parcel Service (UPS)

• Strong Earnings: UPS reported earnings of $1.74 per share, significantly beating the expected $1.30. While revenue was described as "iffy" and down year-over-year, the strong earnings performance was seen as a key driver for the stock's pop.
• Operational Changes: The company's decision to cut 48,000 workers this year, while unfortunate, is viewed as a positive for future profitability by enabling leaner operations.
• Stock Performance: UPS is down 22.56% year-to-date and has not participated in the broader market rally, trading inversely to the S&P 500. It is currently pressing against resistance at $96.

PayPal

• "Trifecta" of Positive News: PayPal achieved a "trifecta" of positive developments: beating Q3 earnings expectations, providing a strong full-year profit outlook, and announcing a significant deal with OpenAI.
• OpenAI Partnership: This deal is considered the most impactful, potentially strengthening PayPal's position in the market. The ability for users to make payments within OpenAI applications using PayPal is a key feature.
• Ecosystem Integration: The partnership is part of a broader trend of in-app experiences within OpenAI's ecosystem, with potential integrations with other services like DoorDash, Airbnb, and Etsy. This is expected to be a significant boost for companies involved.

Skyworks and Corvo Merger

• Merger of Competitors: Skyworks is acquiring Corvo, two companies that are competitors in the radio frequency (RF) chip market and suppliers to Apple.
• Combined Entity Value: The combined company is projected to be a $22 billion chip business.
• Market Impact: This merger is expected to open new doors for both companies. Corvo has performed well this year, up approximately 45%. The merger is seen as a potential turning point for both companies, which have experienced some struggles.
• Financial Prudence: A reminder is given to focus on the financials of such mergers, as emphasized by Pete.

Rambus

• Mixed Results and Guidance: Rambus reported mixed results, beating revenue expectations (up 22.5% year-over-year) but showing weaker performance in other metrics. The company's guidance was also not particularly impressive.
• Strong Stock Performance: Despite the mixed quarter and guidance, Rambus has had a strong run, up 48% in the last quarter and 100% year-to-date. A 6-8% pullback is not considered a major concern given this performance.
• Analyst Sentiment: Evercore ISI raised its price target for Rambus from $114 to $126, maintaining an "Outperform" rating and viewing the stock as a "buyer of weakness," despite the recent pullback.

Sports Analysis

Shohei Ohtani: The "Superman" of Baseball

Shohei Ohtani is lauded as an exceptional, "Superman"-like athlete in baseball. His dual threat as both a pitcher and hitter is unprecedented.

• Recent Performance Highlights:
  • In an 18-inning World Series game, he recorded two home runs, two doubles, was on base nine times, went 4-for-4 through seven innings, and received nine walks.
  • In a previous game against Milwaukee, he hit three home runs, had three RBIs, pitched six innings with 10 strikeouts, and allowed only two hits.
• Physical Attributes: He is described as a large individual, 6'4" and 225 pounds, yet incredibly nimble.
• Legacy: He is considered one of the greatest baseball players of all time, drawing comparisons to Magic Johnson for his all-around dominance and impact.

Heisman Trophy Race: Emerging Quarterbacks

The discussion shifts to the Heisman Trophy race, with a focus on quarterbacks.

• Fernando Mendoza (Indiana University):
  • A transfer from Cal, Mendoza has thrown 24 touchdowns against only 3 interceptions at Indiana, a school not traditionally known for football.
  • Under Coach Signetti, Indiana has become a strong football program, currently ranked second nationally.
  • Indiana recently defeated UCLA 56-6, with Mendoza throwing four touchdowns despite under 200 passing yards.
  • He boasts a 73% completion rate.
  • Odds makers have him as the favorite at +300.
• Ty Simpson (Alabama):
  • A younger player at Alabama, Simpson has 20 touchdowns and only 1 interception.
  • Alabama is undefeated and highly ranked.
  • The presence of strong receivers at Alabama is acknowledged as a factor, but Simpson's individual talent is emphasized.

The emergence of teams like Indiana as football powerhouses, driven by strong coaching and quarterback play, is seen as a positive development for college football, despite criticisms of the transfer portal and NIL deals. The "free agency" aspect of college football is acknowledged, with the potential for positive outcomes being observed.